In a complaint filed just before Christmas, the Southern District of New York has once again been called upon to address the question of whether a grant of exclusive copyrights in a book includes the right to publish the work as an e-book, or whether e-books are a “new use” in which the author may separately grant rights to another.
The case has broad implications for digital publishing rights. While current publishing agreements are almost certain to make explicit whether electronic rights in addition to print rights are transferred, digital publishing rights simply were not contemplated in the multitude of pre-digital era publishing contracts still in existence. In those cases, will the general copyright law concept that rights not expressly granted in a contract are reserved to the grantor prevail? Or will digital expressions be found to be merely another means of distribution of the same rights that were previously granted in the publishing contract?
The positions taken by the e-book publisher this month in its answer and affirmative defenses to the complaint suggest that HarperCollins Publishers LLC v. Open Road Integrated Media, LLP, 11-cv-9499-NRB (S.D.N.Y), may be the case in which these questions are finally answered.
The HarperCollins Complaint
HarperCollins alleges in its complaint that its agreement with author Jean Craighead George, granting it the exclusive right to publish George’s 1973 Newbery Medal-winning children’s novel Julie of the Wolves “in book form,” explicitly includes the right to publish the work via “computer, computer-stored, mechanical and other electronic means now known or hereafter invented.” HarperCollins did not attach the contract at issue to its complaint, but the allegations of the complaint suggest that the quoted language appears in a different paragraph of the contract than the provision granting the exclusive rights. HarperCollins also found it necessary to explain why a stated limitation—that HarperCollins must seek George’s consent to license rights enumerated in the paragraph referencing the after-invented electronic formats—does not impact the situation at hand, where a third party claims superior rights to publish the work in e-book form.
And while HarperCollins alleges in its complaint that it is the particular contract at issue that gives it the exclusive right to publish the work as an e-book, the relief it seeks is much broader. In addition to a declaration that its copyrights were infringed by Open Road in the publication of the Julie of the Wolves e-book, HarperCollins also seeks an injunction prohibiting Open Road from “making copies or delivering copies to third parties in e-book format of any other HarperCollins works as to which HarperCollins has been granted an exclusive license to publish . . . ‘in book form.’”
Open Road’s Answer and Defenses
Not surprisingly, Open Road has denied that the 1970s grant to HarperCollins of exclusive rights to publish Julie of the Wolves “in book form” encompasses the right to publish the work as an e-book. Open Road further alleges that its activities are expressly authorized by a valid, written agreement with the author. According to Open Road, the author retained e-book publication rights under her agreement with HarperCollins, and therefore Open Road’s distribution of the work as an e-book does not violate any of HarperCollins’ exclusive copyrights. Ms. George apparently agrees with Open Road and intends to intervene as a defendant in the action. She is quoted in a statement issued by Open Road as supporting Open Road’s claim that her contract with HarperCollins did not grant rights to publish her work as an e-book, stating that “When I signed that contract in 1971, eBooks did not exist so I could not have granted those rights. I am with Open Road all the way.”
The Second Circuit’s Random House v. Rosetta Books Decision
Some have suggested that the question of whether a grant of the right to publish a work “in book form” includes the right to publish the work as an e-book was settled in 2002 when the Second Circuit decided Random House, Inc. v. Rosetta Books LLC, 283 F.3d 490, 491-492 (2d Cir. 2002). In that decision, the Circuit Court of Appeals affirmed the Southern District of New York court’s denial of a similar attempt by Random House, Inc. to preliminarily enjoin Rosetta Books LLC from continuing to sell as e-books certain novels whose authors had granted Random House the exclusive right to publish the works “in book form.”
Far from deciding the issue, however, the Second Circuit explicitly refrained from expressing any views as to the ultimate merits of the case, and in fact observed that there was some appeal to Random House’s argument that an “ebook” is simply a “form” of a book, and therefore within the coverage of the exclusive license.
Instead, the Second Circuit merely declined to find that the lower court had abused its discretion in denying the injunction. The appellate court found that the scope of the parties’ agreement presented mixed question of law and fact, which (1) would depend on fact-finding regarding the “reasonable expectations of the contracting parties cognizant of the customs, practices, usages and terminology as generally understood in the trade or business at the time of contracting,” and (2) would be governed by the “restrictive” law of New York regarding the kinds of “new uses” to which an exclusive license may apply when the contracting parties do not expressly provide for coverage of such future forms.
The appellate court was not willing to disturb the district court’s preliminary decision before the development of a full record, particularly where the balance of hardships tipped in favor of Rosetta Books. Indeed, Rosetta Books could have been put out of business by the proposed injunction, whereas Random House could have been adequately compensated with a monetary recovery for any lost sales if it ultimately prevailed on the merits. But, as is so often the case, there was no finding on the merits; the Rosetta Books case was dismissed pursuant to settlement after it was remanded to the district court for trial.
Why the Case Presents a Major Question for the Publishing Industry
Sales of e-books are growing rapidly. Indeed, HarperCollins cites in its complaint a May 2011 announcement by Amazon.com that its e-book sales now exceed its printed book sales. Due to the large number of copyrighted modern classics that are exclusively licensed to book publishers by longstanding publishing contracts, the HarperCollins v. Open Road case presents significant issues that are sure to be closely watched by the publishing industry.